On The Money Grain Commentary 8-25-16

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Corn Outlook:

Traders are gearing up for a potential record corn harvest that is just around the corner. Some dispute USDA’s recent yield estimate of 175.1 bpa as too optimistic. However, with the crop rating rising one-point last week to 75 percent in good-to-excellent condition, maybe, they are dead on. According to Ag Watch’s yield model, the national yield is 173.2 bpa. In the meantime, the funds are becoming more bearish as they increased their short position 100 MB last week to 695 MB. The largest short position that they have held during August was in 2013 at 940 MB. Export inspections saw a slight improvement last week at 49.1 MB with year to date shipments at 1.736 BB. USDA’s export projection is 1.925 BB.

Bean Outlook:

There is chatter among the trade circles that the yield for soybeans could top 50 bpa versus USDA’s current estimate of 48.9 bpa. For the fourth straight week, the crop rating has stood at 72 percent in good-to-excellent condition and is just under the record set in 1993. According to Ag Watch’s yield model, the national yield is 49.9 bpa. We appear to be headed for a record crop, and the lack of sales to China this week has soured the bulls as evidenced by Thursday’s steep decline. Last week, export inspections were 35.2 MB with China taking 15.2 MB or 43 percent of shipments. Cumulative shipments for the year are 1.815 BB with USDA projecting exports of 1.880 BB. Last week, the funds toned down their bullish enthusiasm as they reduced their long position 55 MB to 470 MB. Right now, the question is whether they will hold onto their longs, especially with a record harvest looming.

Wheat Outlook:

Wheat is struggling as it faces stiff export competition from the Black Sea region. According to the USDA, shipments from there are expected to rise 15.0 million tons over a year ago. Meanwhile, U.S. export inspections last week were 19.5 MB and above the average needed to reach USDA’s target of 950 MB. In the end, it will become a currency play between the Russian ruble and the dollar as to who gets the lion’s share of the business. Right now, the dollar acts like it could weaken further, but both currencies have longer-term growth potential. In other developments, spring wheat harvest is 65 percent complete, and the funds trimmed 50 MB from their short position last week reducing it to 605 MB.

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